There have been a lot of ups and downs in the post-pandemic world. Despite the volatility, the TSX Composite Index surged 76% in five years. Several growth stocks outperformed the market. If you think Shopify or OpenText were the outperformers, you are mistaken. While Shopify stock surged only 43%, OpenText stock fell 27% in the last five years, as these stocks could not achieve their 2021 rally.
What does this performance tell you about tech stocks?
Many of them are cyclical and may not be a good investment for the long term.
However, this conservative growth stock has outperformed the market, surging 152% in five years. This stock is a smart investment because it enjoys strong demand for its solutions in a growing economy with flourishing trade and also in a slowing economy with trade tensions.
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Why is this the smartest conservative stock to buy right now?
Descartes Systems (TSX:DSG) is at a sweet spot wherein it offers supply chain management solutions as well as logistics processes to a diverse customer base. This stock has generated a compounded annual growth rate (CAGR) of 20% for the last 10 years and continues to grow. However, its competitor Kinaxis (TSX:KXS) has been struggling to outperform.
What makes Descartes a better performer than Kinaxis?
It comes down to the business model.
Kinaxis stock
Kinaxis offers supply chain management solutions only to big companies. Its Maestro platform helps companies run strategic scenarios and make data-informed decisions. Kinaxis operates on a subscription-only model, where the subscription is a three- to five-year fixed cost. This brings recurring revenue, but the user base is limited to large customers. While revenue grows, so do its operating expenses, resulting in uneven earnings per share (EPS).
| Year | Kinaxis Revenue (US$ Millions) | YoY Growth | EPS |
| 2015 | $91.27 | 30% | $0.52 |
| 2016 | $115.95 | 27% | $0.43 |
| 2017 | $133.32 | 15% | $0.80 |
| 2018 | $150.73 | 13% | $0.55 |
| 2019 | $191.55 | 27% | $0.88 |
| 2020 | $224.89 | 17% | $0.51 |
| 2021 | $250.72 | 11% | -$0.04 |
| 2022 | $366.89 | 46% | $0.72 |
| 2023 | $426.97 | 16% | $0.35 |
| 2024 | $483.10 | 13% | $0.00 |
Descartes Systems stock
Descartes Systems operates differently. It gives its customers the flexibility to purchase its solutions either on a subscription, transactional, or perpetual license basis. The company has expanded vertically, which allows supply chain planning and trade execution. Here are some of its execution solutions: it audits and pays transportation invoices and files customs and security documents for imports and exports.
The tariff war increased the demand for its global trade intelligence, routing, and transportation management solutions. Companies can research and perform trade tariffs and duty calculations on the Descartes Systems platform. Complementing its solutions is its Global Logistics Network, which brings the logistics community on one platform, smoothing communication and trade execution.
The community approach and flexible access to enterprise-level supply chain and logistics solutions have significantly reduced its selling and distribution expenses. Descartes’s operating expense is 36% of its revenue, while that of Kinaxis is 80% of its revenue. Kinaxis spends 22% of its revenue on selling and marketing alone.
| Year | Descartes Systems Revenue (US$ Millions) | YoY Growth | EPS |
| 2015 | $185.00 | 8% | $0.27 |
| 2016 | $203.80 | 10% | $0.31 |
| 2017 | $237.40 | 16% | $0.35 |
| 2018 | $275.20 | 16% | $0.40 |
| 2019 | $325.80 | 18% | $0.45 |
| 2020 | $348.70 | 7% | $0.61 |
| 2021 | $424.70 | 22% | $1.00 |
| 2022 | $486.00 | 14% | $1.18 |
| 2023 | $572.90 | 18% | $1.34 |
| 2024 | $651.00 | 14% | $1.64 |
Why is Descartes a good investment right now?
While Kinaxis has a better 10-year revenue compounded annual growth rate (CAGR) of 18%, its EPS volatility restricts its stock performance. Meanwhile, Descartes has a 13.4% revenue CAGR but a 19.8% EPS CAGR, which acts as a catalyst for the stock price.
Descartes stock fell 20% between February and April 2025 due to tariff uncertainty. Its stock price surged 16% once Donald Trump paused retaliatory tariffs, as this pause will shift the latter half trade to the first half.
The stock could see more growth as tariff uncertainty could boost demand for global trade intelligence and customs and compliance solutions. Moreover, any structural changes in the supply chain could drive demand for routing solutions.
Taking a conservative estimate, an average 20% growth in the stock price could double your money in five years.
